Nigeria - Telecommunication Services: An emerging market (Strategy, Performance and Risk Analysis)
Nigeria has undergone a major economic transformation and is now one of the fastest growing economies in Africa and the Middle East. Nigeria's nominal GDP, however, increased at a very slow 0.3% CAGR from US$73,688 billion in 2012 to US$74,640 billion in 2016, mainly driven by the growth in the telecommunication and technology sectors and an increase in investments. Despite economic instability in the country, investment from other countries has been increasing and offers opportunities, especially in the telecom market.
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Increasing adoption of bundled services to drive mobile subscriptions
Nigeria has huge growth potential in the telecom industry. Total mobile subscriptions increased at 9.4% CAGR during 2012-16 to reach 161.9 million in 2016 from 112.9 million in 2012 due to an increase in the number of postpaid users. A common trend noted in the industry is subscribers shifting from prepaid to postpaid. Postpaid subscriptions increased at 18.6% CAGR during 2012-2016 from 56.1 million in 2012 to 78.8 million in 2016 and is expected to increase at 13.9% CAGR over 2016-2021 to reach 93.7 million by 2021 due to continuous technological improvements. The increase in postpaid subscriptions is attributed to a range of bundled services provided by operators which retain existing and attract new subscribers.
4G roll out to improve mobile services
The shift to 4G networks is expected to stimulate interest from deep-pocketed investors and improve mobile services. 4G LTE aims to offer users faster, more reliable mobile broadband for devices like smartphones, tablets and laptops. The 4G LTE network uses the 800MHz frequency and has 1,500 LTE sites transmitted by fiber-optics. This will upgrade the country’s telecom sector by offering converged IP-based voice, data and entertainment services and will also improve mobile broadband services. 4G licences will place greater demands on network infrastructure and could help boost the economy.
Nigeria has high-levels of corruption, bad governance, political instability and a cyclical legitimacy crisis. High levels of unemployment in a young population presents a high risk of civil unrest, resulting in political wrangling and the disruption of normal business activity in the telecom industry.